Exhibit 10.12

                 SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE

     This AGREEMENT is entered into by and between Saucony, Inc. (the "Company")
and Wolfgang Schweim (the "Employee").

     WHEREAS,  the parties wish to resolve  amicably the  Employee's  separation
from  the  Company  and  establish  the  terms  of  the   Employee's   severance
arrangement;

     NOW,  THEREFORE,  in consideration of the promises and conditions set forth
herein,  the  sufficiency of which is hereby  acknowledged,  the Company and the
Employee agree as follows:

1.   Termination  Date.  The Employee's  effective date of termination  from the
     Company is January 2, 2004.

2.   Monetary  Consideration.  In  return  for  the  execution  of  the  instant
     Severance and Settlement  Agreement and Release,  the Company agrees to pay
     the Employee  Two Hundred Four  Thousand  Dollars  ($204,000.00),  less all
     applicable state and federal taxes as severance pay. The severance pay will
     be paid to the Employee in one lump sum on January 31, 2004,  provided that
     the Employee has not revoked his  acceptance  of the  Agreement  during the
     seven (7) day revocation period.

3.   Release.   The   Employee   hereby   fully,   forever,    irrevocably   and
     unconditionally releases, remises and discharges the Company, its officers,
     directors,  stockholders,  corporate affiliates,  subsidiaries,  and parent
     companies,  agents,  employees,  and  attorneys  from  any and all  claims,
     charges,  complaints,  demands,  actions,  causes of action, suits, rights,
     debts, sums of money, costs, accounts,  reckonings,  covenants,  contracts,
     agreements, promises, doings, omissions, damages, executions,  obligations,
     liabilities,  and expenses (including  attorneys' fees and costs), of every
     kind and  nature  which he ever had or now has  against  the  Company,  its
     officers, directors, stockholders,  corporate affiliates,  subsidiaries and
     parent  companies,  agents,  employees  and  attorneys,  arising out of his
     employment with or separation from the Company  including,  but not limited
     to,  all  employment  discrimination  claims  under  Title VII of the Civil
     Rights Act of 1964, 42 U.S.C. ss. 2000e et seq., the Age  Discrimination in
     Employment Act, 29 U.S.C. ss. 621 et seq., the Americans With  Disabilities
     Act of 1990,  42  U.S.C.  ss.  12101 et seq.,  and the  Massachusetts  Fair
     Employment  Practices Act, M.G.L. c.151B, ss.1 et seq., all as amended, and
     all claims arising out of the Fair Credit Reporting Act, 15 U.S.C. ss. 1681
     et seq., the Employee Retirement Income Security Act of 1974 ("ERISA"),  29
     U.S.C. ss. 1001 et seq., the  Massachusetts  Civil Rights Act, M.G.L. c. 12
     ss.ss.  11H and 11I, the  Massachusetts  Equal Rights Act, M.G.L. c. 93 ss.
     102 and M.G.L. c. 214, ss. 1C, the Massachusetts  Labor and Industries Act,
     M.G.L. c. 149, ss. 1 et seq., and the Massachusetts  Privacy Act, M.G.L. c.
     214, ss. 1B, all as amended,  and all common law claims including,  but not
     limited to,  actions in tort,  defamation  and breach of contract,  and any
     claim or damage arising out of the Employee's employment with or separation
     from the Company  (including a claim for retaliation)  under any common law
     theory or any federal,  state or local  ordinance not expressly  referenced
     above, provided,  however, that nothing in this Agreement prevents him from
     filing,  cooperating  with, or participating  in any proceeding  before the
     EEOC or a state Fair Employment  Practices Agency (except that the Employee
     acknowledges  that he may not be able to recover any  monetary  benefits in
     connection with any such claim, charge or proceeding).

4.   Non-Disclosure.   The  Employee   acknowledges   his   obligation  to  keep
     confidential  all  non-public  information  concerning the Company which he
     acquired  during the course of his employment  with the Company,  as stated
     more fully in the non-disclosure  agreement executed by the Employee at the
     inception of his employment which remains in full force and effect.

5.   Return of Company  Property.  The Employee confirms that he has returned to
     the Company all keys,  files,  records (and copies thereof),  equipment and
     other Company-owned property in his possession or control. In addition, the
     Employee agrees to leave intact all electronic Company documents, including
     those which he developed or helped develop during his employment.

6.   Non-Disparagement.  The Employee understands and agrees that as a condition
     for payment to him of the consideration  described herein, he will not make
     any  false,  disparaging  or  derogatory  statements  to any media  outlet,
     industry  group,  investors,  financial  institution  or  current or former
     employee,  consultant,  client or  customer of the  Company  regarding  the
     Company  or  any  of  its  directors,   officers,   employees,   agents  or
     representatives  or about the  Company's  business  affairs  and  financial
     condition.

7.   Confidentiality.  To the extent permitted by law, the Employee  understands
     and agrees  that as a  condition  for  payment to him of the  consideration
     herein  described,  the  terms  and  contents  of this  Agreement,  and the
     contents of the negotiations  and discussions  resulting in this Agreement,
     shall be  maintained  as  confidential  by the  Employee,  his  agents  and
     representatives,  and none of the above  shall be  disclosed  except to the
     extent  required  by  federal  or state  law or as  otherwise  agreed to in
     writing by the Company.

8.   Nature  of  Agreement.  The  Employee  understands  and  agrees  that  this
     Agreement is a severance and  settlement  agreement and does not constitute
     an admission of liability or wrongdoing on the part of the Company.

9.   Amendment.  This Agreement shall be binding upon the parties and may not be
     abandoned,  supplemented,  changed or  modified  in any  manner,  orally or
     otherwise,  except by an  instrument in writing of concurrent or subsequent
     date signed by a duly authorized representative of the parties hereto. This
     Agreement is binding upon and shall inure to the benefit of the parties and
     their  respective  agents,  assigns,   heirs,  executors,   successors  and
     administrators.

10.  Waiver of Rights.  No delay or omission by the  Company in  exercising  any
     rights under this Agreement  shall operate as a waiver of that or any other
     right.  A waiver or consent given by the Company on any one occasion  shall
     be effective only in that instance and shall not be construed as a bar or a
     waiver of any right on any other occasion.

11.  Validity.  Should  any  provision  of  this  Agreement  be  declared  or be
     determined by any court of competent jurisdiction to be illegal or invalid,
     the validity of the remaining  parts,  terms,  or  provisions  shall not be
     affected thereby and said illegal and invalid part, term or provision shall
     be deemed not to be a part of this Agreement.

12.  Applicable  Law.  This  Agreement  shall  be  governed  by the  laws of the
     Commonwealth of  Massachusetts,  and is binding upon and shall inure to the
     benefit  of the  parties  and  their  respective  agents,  assigns,  heirs,
     executors, successors and administrators.

13.  Acknowledgments.   The  Employee   acknowledges  that  he  has  been  given
     twenty-one  (21)  days to  consider  this  Agreement  and that the  Company
     advised  him to consult  with any  attorney  of his own  choosing  prior to
     signing this Agreement. The Employee may revoke this Agreement for a period
     of seven (7) days after the execution of this Agreement,  and the Agreement
     shall not be effective or  enforceable  until the  expiration of this seven
     (7) day revocation period.

14.  Voluntary Assent. The Employee affirms that no other promises or agreements
     of any  kind  have  been  made  to or  with  him by any  person  or  entity
     whatsoever  to  cause  him to  sign  this  Agreement,  and  that  he  fully
     understands the meaning and intent of this  Agreement.  The Employee states
     and  represents  that he has had an opportunity to fully discuss and review
     the terms of this Agreement with an attorney.  The Employee  further states
     and represents that he has carefully read this  Agreement,  understands the
     contents  herein,  freely and  voluntarily  assents to all of the terms and
     conditions hereof, and signs his name of his own free act.

15.  Entire  Agreement.  This  Agreement  contains  and  constitutes  the entire
     understanding  and agreement between the parties hereto with respect to the
     severance  and  supercedes  all  previous  oral and  written  negotiations,
     agreements,  commitments,  and writings in connection therewith. Nothing in
     this Section  shall,  however,  modify,  cancel or supercede the Employee's
     obligations set forth in Section 7.

16.  Counterparts. This Agreement may be executed in two signature counterparts,
     each of which shall constitute an original, but all of which taken together
     shall constitute but one and the same instrument.

     IN  WITNESS  WHEREOF,  all  parties  have set  their  hand and seal to this
Agreement as of the date written below. WOLFGANG SCHWEIM

 /s/ Wolfgang Schweim                   Date:    1/7/04
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SAUCONY, INC.

By:      /s/ Michael Umana              Date:     1/2/04
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